Inflation of closing stock results is
a) Inflation of loss
b) Deflation of loss
c) Inflation of profit
d) Deflation of profit
Answer: (c) Inflation of closing stock results is inflation of profit. In case of rising prices (inflation), LIFO will provide the lowest value of closing stock and profit. Since LIFO (last-in, first-out) is moving the recent/higher costs to the cost of goods sold, the older/lower costs remain in inventory.
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